GAO discussed its work on the Department of Defense's (DOD) latest reform initiatives, focusing on: (1) risks associated with reducing budgets before savings are achieved; (2) challenges associated with implementing DOD's various business process reengineering initiatives; (3) opportunities to capitalize on consolidation and regionalization opportunities; and (4) underlying management problems that need to be addressed in implementing the reform initiatives.

GAO noted that: (1) DOD's plans to reduce outyear budgets before the magnitude of savings is clearly known are not without risks; (2) this risk is that operating units and field commanders will not have sufficient funds to meet their readiness needs; (3) past reform initiatives, like the Defense Management Review of the early 1990s, started with much the same hope and promise of the Defense Reform Initiative (DRI); (4) however, for a number of reasons, they were not able to sustain themselves and fully achieve hoped for results; (5) in many cases, DOD reduced its operations and maintenance budgets up front, in anticipation that the savings would be realized; (6) when these savings did not materialize as quickly or to the extent expected, two things happened; (7) either money was deferred from other parts of the defense budget to pay for shortfalls in operations and maintenance accounts or support functions were unfunded; (8) GAO sees the same type of risk with the DRI; (9) many of the DRI business process reengineering initiatives must overcome significant challenges if they are to be implemented in a timely, efficient, and effective manner; (10) while DOD expects these initiatives to save an unspecified amount of money, it is also counting on them to bring world-class business processes to DOD and improve the quality of service provided to defense customers; (11) GAO's overall impression is that the initiatives have the potential to save significant amounts of money and improve the quality of service they provide; (12) however, in some cases, DOD either faces significant implementation challenges or is not thinking broadly enough in implementing the reform; (13) significant opportunities exist to achieve savings from consolidating, restructuring, and regionalizing initiatives; (14) however, GAO's past work on these initiatives shows that DOD has not been able to fully capitalize on the potential offered by such consolidations; and (15) achieving success in the DRIs requires DOD to address the underlying causes of its systemic management problems.